Dáil Éireann díospóireacht -
Tuesday, 5 Nov 2002

Vol. 556 No. 3

Written Answers. - National Pensions Reserve Fund.

Paul McGrath

Ceist:

274 Mr. P. McGrath asked the Minister for Finance the details of each of the major deposits into the recently established pension reserve fund; the type of investments which have been made with these funds; the amount of this fund which is held in equities; and the returns or losses recorded on these investments to date. [19760/02]

Minister for Finance (Mr. McCreevy)

The issues raised by the Deputy were covered in the answer given to Parliamentary Questions Nos. 170-173 and 175 on Tuesday, 16 October. That answer contained the following information:

Section 18(2) of the National Pensions Reserve Fund Act, 2000, provides that each year there shall be paid into the National Pensions Reserve Fund, in equal quarterly instalments, a sum equivalent to 1% of GNP.

The National Pensions Reserve Fund was established on 2 April 2001 with €6,515 million being allocated to the fund. This sum was comprised of the net proceeds of the sale of the former Telecom Éireann and 1% of GNP in 1999 and 2000 as well as interest earned on same.

A total of €972 million, representing the 1% of GNP contribution, was paid into the fund in 2001. The first three quarterly payments of 2002, amounting to some €775 million, have already been made this year and the fourth payment of €258 million will be made in December. Thus, to end-September, 2002, total payments into the fund amounted to €8,262 million.

According to the 2001 annual report submitted to me by the commission, the fund earned a return of 3.27% for the period to 31 December 2001 compared to a short-term benchmark return of 3.24%, and a long-term benchmark return of – 3.5%.

The fund is managed by commissioners who are independent of Government. They control and manage the fund with discretionary authority to determine and implement an investment strategy for the fund. This investment strategy is based on a commercial investment mandate with the objective of securing the optimal return over the long-term, having regard to (a) the purpose of the fund as set out in section 18(1) of the Act, and (b) the payment requirements of the fund as provided for under section 20, provided the level of risk to the moneys held or invested is acceptable to the commission.

In this regard, the commission's report stated that the fund would be invested 80% in equities and 20% in bonds. As the investment strategy is designed with long-term returns in mind, short-term losses which may never be realised cannot be taken as an indicator of fund performance. The commission is required by law to submit to me an annual report and the next such report is due around mid-2003. At end 2001 the total value of moneys standing to the credit of the fund was €7,715 million which included interest earned on the contributions to date. Following is a table detailing contributions to the National Pensions Reserve Fund:

Temporary Holding Fund for Superannuation Liabilities

€m

December-99	Net Transfer from Proceeds of Sale of Telecom Eireann	4,528
December-99	19991% of GNP	739
September-00	20001% of GNP	890

Interest Earned by Temporary Holding Fund for

Superannuation Liabilities 358

April-01 Transfer to National Pensions Reserve Fund 6,515

GNP Contributions for 2001

May-01	0.25% of GNP	243
June-01	0.25% of GNP	243
September-01	0.25% of GNP	243
November-01	0.25% of GNP	243	972

Interest Earned by National Pensions Reserve Fund (net of expenses)

228

Valuation of NationalPensions Reserve Fund	31 December 2001	7,715

GNP Contributions for 2002 to date

May-02	0.25% of GNP	258
June-02	0.25% of GNP	258
September-02	0.25% of GNP	259	775